UPDATE 1-Huadian Power plans bonds, assets injection

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HONG KONG, Feb 14 (Reuters) - Huadian Power International Corp Ltd (1071.HK: Quote, Profile, Research, Stock Buzz) (600027.SS: Quote, Profile, Research, Stock Buzz) said it planned to issue up to 5.3 billion yuan ($736.4 million) worth of bonds with warrants, raising capital to fund acquisitions of assets from its parent and for the construction of power plants.

The Chinese power producer said in a statement late on Wednesday that about 2 billion yuan from the issue would be used to fund its purchase of interests in four power companies from its parent, with total attributable capacity in operation of 1,497 megawatts.

About 1.4 billion yuan would be used to fund construction of power plants and the another 1.5 billion yuan would be used to repay borrowings. The remainder would be used for working capital, it said.

Huadian, which vies with bigger rivals Huaneng Power International (0902.HK: Quote, Profile, Research, Stock Buzz)(HNP.N: Quote, Profile, Research, Stock Buzz)(600011.SS: Quote, Profile, Research, Stock Buzz) and Datang International Power (0991.HK: Quote, Profile, Research, Stock Buzz)(601991.SS: Quote, Profile, Research, Stock Buzz) to fuel the world's second-largest electricity consumer, has said it plans to invest $6 billion to expand capacity by 75 percent to 35,000 megawatts by the end of 2010 from about 20,000 megawatts at the end of 2007.

The assets injection from its parent is less than what analysts had expected of between 2,500 and 4,000 megawatts and analysts say bonds with warrants will inevitably increase Huadian's already high gearing ratio.

"We think the company is already excessively geared and believe the company should have issued equity to help recapitalise its balance sheet," UBS analyst Stephen Oldfield said in a report.

Citigroup analyst Pierre Lau said net profit of the four plants' stake to be bought by Huadian was 119 million yuan in the first nine months of 2007 and they would add 10 to 15 percent to earnings per share of Huadian in 2008.

The Hong Kong-listed shares of Huadian fell 2.7 percent on Thursday, lagging a 2.9 percent rise in the broader Hang Seng Index .HSI. They soared 14.4 percent on Wednesday ahead of the announcement.

For details please see here (US$1=HK$7.8=7.197 yuan) (Reporting by Donny Kwok and Judy Hua; Editing by Nick Macfie)